Multible Choice questions for Advance Accounting 1, please choose the best answer:

1- Which one is not the five steps in the revenue recognition process?

a) Recognize revenue when each performance obligation is satisfied.

b) Determine the transaction price.

c) Identify the contract(s) with customers.

d) Identify the accounting standard applied in the contract.

2- Which one is correct about revenue recognized in the following situations?

a) Revenue from selling productsdate of delivery to customers.

b) Revenue from services performedwhen the services have been performed (performance obligation satisfied).

c) Revenue from permitting others to use company assetsas time passes or as the assets are used.

d) All of above

3- Allee Corp. is evaluating a revenue arrangement to determine proper revenue recognition. The contract is for the construction of 10 speedboats for a contract price of$400,000. The customer needs the boats in its showrooms by February 1, 2020, for the boat purchase season; the customer provides a bonus payment of $21,000 if all boats are delivered by the February 1 deadline. The bonus is reduced by $7,000 each week that the boats are delivered after the deadline until no bonus is paid if the boats are delivered after February 15, 2020. Allee frequently includes such bonus terms in its contracts and thus has good historical data for estimating the probabilities of completion at different dates. It estimates an equal probability (25%) for each full delivery outcome. How much should Allee charge to determine the transaction price for this contract on February 15?

a) $105,250

b) $103,500

c) $101,750

d) $100,000

4- Allee Corp. is evaluating a revenue arrangement to determine proper revenue recognition. The contract is for the construction of 10 speedboats for a contract price of$400,000. The customer needs the boats in its showrooms by February 1, 2020, for the boat purchase season; the customer provides a bonus payment of $21,000 if all boats are delivered by the February 1 deadline. The bonus is reduced by $7,000 each week that the boats are delivered after the deadline until no bonus is paid if the boats are delivered after February 15, 2020. Allee frequently includes such bonus terms in its contracts and thus has good historical data for estimating the probabilities of completion at different dates. It estimates an equal probability (25%) for each full delivery outcome. How much should Allee charge to determine the transaction price for this contract after February 15?

a) $105,250

b) $103,500

c) $101,750

d) $100,000

5- Allee Corp. is evaluating a revenue arrangement to determine proper revenue recognition. The contract is for the construction of 10 speedboats for a contract price of$400,000. The customer needs the boats in its showrooms by February 1, 2020, for the boat purchase season; the customer provides a bonus payment of $21,000 if all boats are delivered by the February 1 deadline. The bonus is reduced by $7,000 each week that the boats are delivered after the deadline until no bonus is paid if the boats are delivered after February 15, 2020. Allee frequently includes such bonus terms in its contracts and thus has good historical data for estimating the probabilities of completion at different dates. It estimates an equal probability (25%) for each full delivery outcome. What total transaction price should Allee determine for this contract?

a) $400,000

b) $400,510

c) $405,100

d) $410,500

6- When does a company satisfy a performance obligation?

a) The company has a right to payment for the asset.

b) The company transferred legal title to the asset.

c) The company transferred physical possession of the asset.

d) All of above

7- Fuhremann Co. is a full-service manufacturer of surveillance equipment. Customers can purchase any combination of equipment, installation services, and training as part of Fuhremann's security services. Thus, each of these performance obligations are separate with individual standalone selling prices. Laplante Inc. purchased cameras, installation, and training at a total price of $80,000. Estimated standalone selling prices of the equipment, installation, and training are $90,000, $7,000, and $3,000, respectively. How should the transaction price be allocated to the equipment, installation, and training?

a) Equipment $70,000, installation $6,000, and training $4,000.

b) Equipment $71,000, installation $6,500, and training $3,500.

c) Equipment $72,000, installation $5,600, and training $2,400.

d) Equipment $72,500, installation $5,900, and training $1,600.

8- Campus Cellular provides cell phones and 1 year of cell service to students for an upfront, nonrefundable fee of $300 and a usage fee of $5 per month. Students may renew the service for each year they are on campus (on average, students renew their service one time). What amount of revenue should Campus Cellular recognize in the first year of the contract?

a) Campus Cellular recognizes revenue of $200 in both year 1 and year 2.

b) Campus Cellular recognizes revenue of $210 in both year 1 and year 2.

c) Campus Cellular recognizes revenue of $200 in year 1 and $210 in year 2.

d) Campus Cellular recognizes revenue of $210 in year 1 and $200 in year 2.

9- What qualitative and quantitative disclosures are required related to revenue recognition?

a) Contracts with Customers - These disclosures include the disaggregation of revenue, presentation of opening and closing balances in contract assets and contract liabilities, and significant information related to their performance obligations.

b) Significant judgments. These disclosures include judgments and changes in these judgments that affect the determination of the transaction price, the allocation of the transaction price, and the determination of the timing of revenue.

c) Assets recognized from costs incurred to fulfill a contract. These disclosures include the closing balances of assets recognized to obtain or fulfill a contract, the amount of amortization recognized, and the method used for amortization.

d) All of above

10- Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics. Recently, Lenosold and delivered 200 tablet computers to Fallon for $20,000 on January 5, 2019. Fallon has agreed to pay for the 200 tablet computers within 30 days. Fallon has a good credit rating and should have no difficulty in making payments to Leno. What has not explained whether a valid contract exists between Leno Computers and Fallon Electronics?

a) The contract has commercial substanceFallon Electronics has agreed to pay cash for the computers.

b) The parties have approved the contract and are committed to performFallon Electronics has made a commitment to purchase the computers and Leno has approved the selling of the computers. In fact Leno has delivered the computers to Fallon.

c) The identification of the rights of the partiesFallon has the right to the computers and Leno has the right to payment.

d) It is not probable that the consideration will be collectedalthough no cash has yet been paid by Fallon. Fallon has a good credit rating which indicates that the consideration will be collected.

11- What qualitative and quantitative disclosures are required related to revenue recognition?

a) Contracts with Customers - These disclosures include the disaggregation of revenue, presentation of opening and closing balances in contract assets and contract liabilities, and significant information related to their performance obligations.

b) Significant judgments. These disclosures include judgments and changes in these judgments that affect the determination of the transaction price, the allocation of the transaction price, and the determination of the timing of revenue.

c) Assets recognized from costs incurred to fulfill a contract. These disclosures include the closing balances of assets recognized to obtain or fulfill a contract, the amount of amortization recognized, and the method used for amortization.

d) All of above

12- Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics. Recently, Lenosold and delivered 200 tablet computers to Fallon for $20,000 on January 5, 2019. Fallon has agreed to pay for the 200 tablet computers within 30 days. Fallon has a good credit rating and should have no difficulty in making payments to Leno. What has not explained whether a valid contract exists between Leno Computers and Fallon Electronics?

a) The contract has commercial substanceFallon Electronics has agreed to pay cash for the computers.

b) The parties have approved the contract and are committed to performFallon Electronics has made a commitment to purchase the computers and Leno has approved the selling of the computers. In fact Leno has delivered the computers to Fallon.

c) The identification of the rights of the partiesFallon has the right to the computers and Leno has the right to payment.

d ) It is not probable that the consideration will be collectedalthough no cash has yet been paid by Fallon. Fallon has a good credit rating which indicates that the consideration will be collected.

13- Installment sales are most common in the sale of which of the following?

a) Real estate

b) Clothing

c) Groceries

d) Shoes

14- Which of the following entities benefits most from an installment sale?

a) The business

b) The consumer

c) The manufacturer

d) The government

15- An installment sale is a way for a business to defer?

a) Tax on the sale

b) Revenue on the sale

c) Expenditure of the sale

d) None of these answers are correct

16- Coffin Corporation appropriately uses the installment-sales method of accounting to recognize income in its financial statements. The following information is available for 2019 and 2020. In 2019, show the installment sales $900,000, cost of installment sales $594,000, cash collection on 2019 sale $370,000. In 2020, show the installment sales $1,000,000, cost of installment sales $680,000, cash collection on 2019 sale $350,000, and cash collection on 2020 sale $450,000. What is gross profit recognized in 2019?

a) $124,500

b) $125,500

c) $124,800

d) $125,800